The Chinese started the day at the sixth Rolex Series event of the season three shots behind overnight leader Rose but turned that deficit on its head as the World Number Two battled to a 69 at Regnum Carya Golf & Spa Resort.
Frenchman Levy was bogey-free as he carded a hugely impressive 66 to sit a shot clear of 2016 champion Thorbjørn Olesen and two ahead of English pair Sam Horsfield and Danny Willett.
Li - who held off the challenge of Rory McIlroy to win the Dubai Desert Classic earlier in the season - would become the first Asian player to win a Rolex Series event should he claim European Tour title number three on Sunday.
“I really want to win this week and play my best tomorrow,” he said. “Especially at a Rolex Series event. It's going to be an exciting day tomorrow and I'm looking forward to going against Rosey.
“I definitely got a lot of confidence from Dubai and since then I've been playing a lot of big events which has built my confidence, also."
Rose would move back to the top of the Official World Golf Ranking with a victory while Levy - who already has a win this season at the Trophée Hassan II - is looking for European Tour title number six.
Li birdied the first and some dialled-in iron play allowed him to make birdies from five and two feet on the fourth and fifth to get into a share of the lead.
Rose put his own approach at the fourth to five feet to take the solo lead again but ahead on the sixth Li made it three in a row from eight feet.
Rose was clearly in the zone as well, however, and he chipped in on the fifth before putting his tee-shot on the sixth to three feet for a hat-trick of his own and a two-shot lead.
A three-putt on the seventh cut the lead to one and when Li chipped in on the ninth, he turned in 29 and was back in a share of the lead.
Better was to come on the next as his second from the fairway on the par four found the back fringe and rolled slowly back into the cup for an eagle and a two-shot lead.
Rose is made of tough stuff though, and he put his approach on the ninth to five feet and cut the gap to one.
He bogeyed the tenth after finding the water for the second day in a row and a Li birdie ahead on the par-five 12th extended the lead to three.
A Rose approach to three feet on the 11th was the perfect response and he holed a 15-foot putt on the 12th to get back within one before giving the shot straight back on the next after finding sand.
He saved par after finding water on the par five 15th but could not repeat the feat on the last and Li had a cushion.
Levy holed a long right-to-lefter up the hill on the second and smart approaches into the ninth, 11th, and 13th brought further birdies before he took advantage of the par five 15th. An incredible par save on the 16th when he had to play backwards out of the trees then kept him bogey-free for the second day in a row.
Olesen holed an eight-footer on the first and had a tap-in on the fourth but made back-to-back bogeys on the sixth and seventh before picking a shot back up on the ninth. He holed a 12-footer on the 13th and made the most of the 15th but bogeyed the next before getting the shot straight back.
Horsfield carded a 68 and Willett a 67 to sit at 12 under, a shot clear of another Englishman in Tommy Fleetwood and South African Thomas Aiken.
Thai Kiradech Aphibarnrat, Dane Lucas Bjerregaard and England's Tom Lewis were at ten under, while Belgian Thomas Pieters was ten shots off the lead after equalling the course record with a 62.